In the world of business, highlighting the peak features of a product or service has been the number one acquisition of consumers who are swept away with sensationalized marketing and the perks of short-term benefits. Unfortunately, it's usually the consumers at banks who dish out debt in the guise of student loans that are left to allocate their personal income among the costs associated with incurring education. As with any goal, one SMART way to keep up with your finances as a student seeking to avoid as much as debt as possible, is by employing the method of the SMART goal setting.
Know specific information related to your Cost of Attendance and what you're going to owe in its entirety to fund your education.
Forbes said it best, organization is paramount! Create a detailed list of alternative financing options and, if a loan is a reasonable or an only option, organize a list of the loans with the best option that fits your particular financial situation.
Formulate an achievable way to acquisition your alternative options whether it be through scholarships, grants, etc.
Start doing something immediately to start financing yourself while you're in college whether it be a part-time job with education assistance or a work-study job.
Creating a time and action calendar is a great way to manage debt and keep tabs on progress to hold yourself accountable.
Convinced that these aren't the only tools to success, I spoke with skilled Attorney and Student Loan Expert David Stillson, Esq. at the Law Offices of David Stillson, PA in Miami, FL. Stillson has extended his expertise toward increasing the awareness of financial education amongst past and current students across the nation with his background in Student Loan Law, Stillson has provided his counsel to students, parents and even the American Bar Association and has offered his advice with Odyssey Online in an exclusive interview.
KK: What are some of the most efficient organization tips that you've seen throughout your career in student loans?
DS: Organization of student loans begins with knowing what types of student loans that you have. The first step is to create an account through the National Student Loan Data System, which will have all information regarding your federal student loans(not private). Information will include the dates of disbursement; the interest rates; the prior and current status of the loans; and information regarding the servicer, lender, and guarantee agency. If you have private loans, you can find out who your lender is by checking your credit report or by checking with your school. Once you determine and list all of your student loans, you can then tackle all of the payment options you have available for your federal loans (very flexible and affordable), and your private loans (not very flexible). Make sure you provide accurate and updated personal information including your address and phone number to all of your lenders. And ALWAYS be sure to open your mail from your lenders and be sure to keep open lines of communication.
KK: When it comes to the management of student debt, one of the biggest tips I always extend to my peers is to have some sort of income to contribute to debt. Can you give us more information on what students can do to save themselves from debt?
DS: Students can attempt to eliminate their debt burden while in school by creating income through some type of employment. Although you will automatically be placed in an in school deferment as a full-time student, your interest will accrue on your unsubsidized loans and private loans. Making payments toward the loans while in school can slow down the negative amortization process. After graduation, if students are interested in having their debts forgiven they can utilize the Public Service Loan Forgiveness option which involves paying under an income-based plan for 10 years. Once 120 payments are made while working for a qualified employer such as the state, government, or 501(c)(3) not for profit, if there is a remaining balance on qualified direct loans, the balance will be forgiven tax-free. Also, those student who work in the private sector can choose from various income-based plans that will forgiven the loans after 20 or 25 years depending on which plans you qualify for. However, under current law you will receive a 1099 for any of that discharged debt which will be reported as income. You will have to way the risk and benefits of paying your loans affordably with the idea that you can be taxed years later. The savings that you benefit from paying the low payments during the 20/25 years could outweigh the tax burden years later. Plus, an accountant can discuss options to relieve the tax burden especially for those who are insolvent. You'll have to discuss that with your tax professional.
KK: A few weeks ago, you revealed the alarming statistic that 1 in 4 student loan borrowers are delinquent or in default on their student loans! What's a good way that student's can stay on top of their debt and avoid getting in these types of sticky situations before they come?
DS: Students can avoid default or delinquency by immediately getting into one of the various income-based plans. Your payment will be based only on your income and family size. The loan balance will not be considered when factoring the payment. In fact, if you are unemployed or if your income is below 150% of the poverty guidelines for a family of your size, your payment can be 0 dollars. Yes, 0 dollars!
KK: When it comes to the number of different loan options out there, there have been some features that may have been marketed more specifically than others, what are some loan options you have seen that students just aren't taking advantage because they aren't receiving enough information?
DS: In reference to all of the options that are available, when students can not afford their current payments, the loan servicers generally place people on a forbearance period for one year at a time. It's the simple and easy way for them because it can generally be done right over the phone without any paperwork. However, the servicers should be offering all of the balance based and income based plans so that students can make an informed decision. Most importantly, so students can start gaining credit toward their ultimate loan forgiveness if they select and income based payment plan versus a forbearance. The income based plans are unfortunately not discussed or offered at the rate that they should be which would significantly benefit the borrowers.